Dirty Money - How Negative ESG News Impacts Dividend Consumption
9 October 2023
Ever indulged in retail therapy to shake off the blues? It turns out investors might do something similar. Research by professor of Philanthropy and Sustainable Finance Paul Smeets and others, indicates that when investors receive dividends from companies recently involved in social or environmental controversies, they significantly increase their consumption.
In collaboration with a major European bank, the researcher were able to anonymously link investor trading records with their spending patterns. The data reveals that investors are twice as likely to ramp up their spending when their dividends come from companies with recent negative ESG press coverage, compared to dividends from companies without such controversies.
Interestingly, their research aligns with psychological studies that show how people deal with negative emotions by spending more, commonly referred to as comfort buying or retail therapy.